SBA Publishes Revised HUBZone Rules
Today, the U.S. Small Business Administration ("SBA") published its final rule amending the Historically Underutilized Business Zone ("HUBZone") Program regulations. This is the first comprehensive regulatory amendment to the HUBZone Program in more than twenty years. The amendments are designed to "reduce the regulatory burdens imposed on HUBZone small business concerns and government agencies, implement new statutory provisions, and eliminate ambiguities in the regulations."
This rule is effective on December 26, 2019.
Initial Observations
HUBZones must recertify annually (rather than at the time of every offer for a HUBZone contract)
SBA is setting a 20% floor within the definition of "attempt to maintain" (i.e., if a contractor falls below 20% residency during performance of a HUBZone contract, it would be deemed a failure to "attempt to maintain" compliance with the 35% residency requirement for HUBZone small businesses)
SBA is retaining in the definition of “employee,” an individual who works at least 40 hours per month
An employee who resides in a HUBZone at time of certification or recertification (if the employee is being counted as a HUBZone resident for the first time) and continues to live in that residence for at least 180 days and remains an employee of the HUBZone small business concern will count as an employee "even if the employee subsequently moves to a location that is not in a HUBZone or the area in which the employee's residence is located no longer qualifies as a HUBZone"
Clarified the definition of "principal office," including, for example, the requirement that "in order for a location to be considered the principal office, the concern must conduct business at this location"
"A concern that owns or makes a long-term investment (i.e., a lease of at least 10 years) in a principal office in an area that qualifies as a HUBZone at the time of its initial certification will be deemed to have its principal office located in a HUBZone for at least 10 years from the date of that certification as long as the firm maintains the long-term lease or continues to own the property upon which the principal office designation was made. This does not apply to leases of office space that are shared with one or more other concerns or individuals."
The final rule is welcome news for HUBZone small businesses as it undoubtedly reduces some of the regulatory burdens of participating in the program. Annual recertifications and changes to employee residency rules are game changers. SBA's final rule contains a number of changes to the HUBZone Program and is worth taking time to digest in full.
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